Power point of Class 2 group 5 American Airlines

Financial Management
Class 2 Group 5
Trương Thị Thu Thảo 332974
Bùi Minh Nguyệt 295800
Lý Sen Tâm 332939

Outline
 Financial Statement
Income statement
Balance sheet
Cash flow
 Bonds and Bonds Valuation
 Stock and Stock Valuation
 Working Capital Management
 Financial Ratio
Liquidity ratio
Financial leverage ratio
Asset management ratio
Profitability ratio

Background of American Airlines
• Bag information: In
economy, within Canada
• To other destinations, prices
vary by itinerary.
• CEO: Doug Parker
• Headquarters: Fort Worth,
TX, United States of
America
• Founder: Avco Founded:
1930, United States of
America Current
• Logo: "The new American is
arriving."

Southwest Airlines Co.
• A major US airline and the
world's largest low cost carrier,
headquartered in Dallas, Texas.
• The airline has nearly 46,000
employees as of December
2014 and operates more than
3,400 flights per day.
• June 5, 2011, it carries the most
domestic passengers of any
U.S. airline.
• November 2014, Southwest
Airlines has scheduled service
to 93 destinations in 41 states,
Puerto Rico and abroad.

Question 1
WHAT ARE THE 3 MORE SIGNIFICANT CHANGES FROM
THE 3 FINANCIAL SHEETS FOR YOUR
COMPANY AND FOR YOUR COMPETITOR FROM 2008-
2014, WHY DO YOU THINK THIS
HAPPENED?

Financial Statement
Income Statement
American Airlines
$ in million
2014 2013 2010 2009 2008
Net Sales or Revenues $42,650 $26,740 $22,170 $19,920 $23,770
Cost Of Goods Sold (COGS) $30,640 $19,010 $10,040 $16,040 $20,210
Gross Profit $12,010 $6,940 $4,130 $3,000 $3,560
Selling General & Adin Expense $6,460 $4,690 $2,730 $2,900 $4,240
Income Before Depreciation Depletion Aortization $5,540 $2,250 1,40 $100 -$602
Depreciation Depletion Amortization 1,30 $53 $1,090 1,10 $1,210
Non Operating Incoe -$150 -$2,720 -$22 -$46 $541
Interest Expense $7 $56 $792 $702 $723
Pretax Incoe $3,210 -$2,100 -$506 -$1,750 -$2,070
Provision for Incoe Taxes $330 -$346 -$35 -$204 -
Income Before Extra ordinaries & Disc Operations $2,000 -$1,030 -$471 -$1,470 -$2,070
Net Income (Profit/Loss) $2,000 -$1,030 -$471 -$1,470 -$2,070
Average Shares used to copute Diluted EPS $734,020 $107,650 - - $0
Average Shares used to copute Basic EPS 717,46 $10,765 - - -
Income Before Nonrecurring Ites $4,100 $124 - - -
Income fro Nonrecurring Ites -$13,000 - - -
Earnings Per Share Basic Net 4,02 -17,03 - - -
Earnings Per Share Diluted Net 393 -17.03 - - -
EPS Diluted Before Nonrecurring Ites 5.7 11.56 - - -
Dividend Per Share Coon 0.2 - - - -

Income Statement
Southwest Airline
$ in million
2014 2013 2010 2009 2008
Southwest Airlines Net Sales or Revenues $18,610 $17,700 $12,100 $10,350 $11,020
Cost Of Goods Sold (COGS) $13,110 $13,340 $9,060 $8,140 $8,590
Southwest Airlines Gross Profit $5,490 $4,360 $3,040 $2,220 $2,430
Selling General & Admin Expense $2,330 $2,210 $1,430 $1,340 $1,390
Income Before Depreciation Depletion Amortization $3,160 $2,150 $1,620 $878 $1,050
Depreciation Depletion Amortization $938 $867 $628 $616 $599
Non Operating Income -$302 $38 -$94 $67 -$66
Interest Expense $107 $107 $149 $165 $105
Southwest Airlines Pretax Income $1,820 $1,210 $745 $164 $278
Provision for Income Taxes $680 $455 $286 $65 $100
Income Before Extra ordinaries & Disc Operations $1,140 $754 $459 $99 $178
Southwest Airlines Net Income (Profit/Loss) $1,140 $754 $459 $99 $178
Average Shares used to compute Diluted EPS $696 $718 $747 $741 $739
Average Shares used to compute Basic EPS $687 $710 $746 $741 $735
Income Before Nonrecurring Items 1,40 $805 $540 $143 $294
Income from Nonrecurring Items -$261 -$51 -$81 -$44 -$116
Southwest Airlines Earnings Per Share Basic Net 1650 1060 0,620 0,130 0,240
Southwest Airlines Earnings Per Share Diluted Net 1640 1050 0,610 0,130 0,240
EPS Diluted Before Nonrecurring Items 2010 1120 0,720 0,190 0,400
Dividend Per Share Common 0,220 0,130 0,020 0,020 0,020

Financial ratio
first significant change
-2,500
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
2014 2013 2010 2009 2008
American Airlines Net Income
(Profit/Loss)
Southwest Airlines Net Income
(Profit/Loss)
-300.00%
-200.00%
-100.00%
0.00%
100.00%
200.00%
300.00%
400.00%
2014 2013 2010 2009
American Airlines Net Income
(Profit/Loss)
Southwest Airlines Net Income
(Profit/Loss)

Balance SheetAmerican Airlines
$ in million
2014 2013 2010 2009 2008
Cash $1,770 $2,100 $610 $613 $650
arketable Securities $6,310 0,110 $4,330 $4,250 $2,920
Receivables $1,770 $1,560 $730 $760 $11
Inventory $1000 $1,010 $594 $557 $525
Other Current Assets $1,260 $1,470 $560 $450 $1,030
Total Current Assets $12,110 $14,320 $6,040 $6,640 $5,940
Property Plant & Equipent $35,340 $30,390 - - -
Accuulated Depreciation $12,260 $11,130 $11,640 $10,030 $10,450
Net Property Plant & Equipent $23,000 $19,260 $15,000 $15,400 $15,740
Intangibles $6,330 6,40 $932 $900 $1,110
Deposits & Other Assets $2,240 2,30 $2,240 $2,330 2,40
Total Assets $43,770 $42,200 $25,090 $25,440 $25,100
Accounts Payable $1,300 $1,370 $1,160 $1,060 $952
Current Portion Long-Ter Debt $1,710 $1,450 $1,700 $1,020 $1,050
Current Portion Capital Leases - - $107 $90 $107
Accrued Expenses $3,290 $3,610 $2,090 $2,040 $2,040
Other Current Liabilities $7,060 $7,390 $3,660 $3,510 $4,420
Total Current Liabilities $13,440 $13,010 0,700 $7,730 $9,370
Deferred Taxes/Incoe $29 $935 $270 $272 $297
Long-Ter Debt 16,20 $15,350 0,760 $9,900 0,420
Non-Current Capital Leases - - $497 $599 $502
Other Long-Ter Liabilities $11,290 $14,920 $10,730 $10,340 $9,440
Total Liabilities $41,750 $45,010 $29,030 $20,930 $20,110
Coon Stock Net $7 $3 $339 $339 $205
Capital Surplus $15,140 $10,590 $4,450 4,40 $3,790
Retained Earnings -0,560 -11,30 -$5,610 -$5,140 -$3,460
Treasury Stock - - $367 $367 $367
Other Liabilities -$4,560 -$2,030 -$2,760 -$2,720 -$3,100
Shareholders Equity $2,020 -$2,730 -$3,950 -$3,490 -$2,940

Balance Sheet
Southwest Airlines
$ in miliion
Fiscal year is Jan - Dec. 2014 2013 2010 2009 2008
Cash $1,280 $1,360 $1,260 $1,110 $1,370
Marketable Securities $1,710 $1,800 $2,280 $1,480 $435
Receivables $365 $419 $195 $169 $209
Inventory $342 $467 $243 $221 $203
Other Current Assets $709 $418 $517 $666 $1,040
Southwest Airlines Total Current Assets $4,400 $4,460 $4,280 $3,360 $2,890
Property Plant & Equipment $22,510 $20,820 $16,340 $15,890 $15,870
Accumulated Depreciation $8,220 $7,430 $5,770 $5,250 $4,830
Southwest Airlines Net Property Plant & Equipment $14,290 $13,390 $10,580 $10,630 $11,040
Intangibles $970 $970 - - -
Deposits & Other Assets $534 $530 $606 $277 $375
Southwest Airlines Total Assets $20,200 $19,350 $15,460 $14,270 $14,310
Accounts Payable 1,20 $1,250 $739 $746 $668
Current Portion Long-Term Debt $258 $629 $505 $190 $163
Accrued Expenses $1,570 $1,230 $863 $696 $1,010
Other Current Liabilities $2,900 $2,570 $1,200 $1,040 $963
Southwest Airlines Total Current Liabilities $5,920 $5,680 $3,310 $2,680 $2,810
Deferred Taxes/Income $3,260 $2,930 $2,580 $2,800 $3,050
Long-Term Debt $2,990 $2,630 $2,880 $3,330 $3,500
Other Long-Term Liabilities $1,260 $771 $465 - -
Southwest Airlines Total Liabilities $13,430 $12,010 $9,230 $8,800 $9,360
Common Stock Net $808 $808 $808 $808 $808
Capital Surplus $1,320 $1,230 $1,180 $1,220 $1,220
Retained Earnings $7,420 $6,430 $5,400 $4,980 $4,920
Treasury Stock $2,030 $1,130 $891 $963 $1,010
Other Liabilities -$738 -$3 -$262 -$578 -$984
Southwest Airlines Shareholders Equity $6,780 $7,340 $6,240 $5,470 $4,950
Southwest Airlines Total Liabilities & Shareholders
$20,200 $19,350 $15,460 $14,270 $14,310

Financial ratio
second significant change
-4,000
-2,000
0
2,000
4,000
6,000
8,000
2014
2013
2010
2009
2008
American Airlines Shareholders
Equity
Southwest Airlines Shareholders
Equity
-180.00%
-160.00%
-140.00%
-120.00%
-100.00%
-80.00%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
2014
2013
2010
2009
American Airlines Shareholders
Equity
Southwest Airlines Shareholders
Equity

Cash FlowAmerican Airline
$ in million
2014 2013 2010 2009 2008
Net Income Cash Flow 2,880 -1,830 -471 -1,470 -2,070
Depreciation Depletion Amortization Cash-Flow 1,340 1,020 1,090 1,10 1,210
Net Increase (Decrease) in Assets Liabilities -1,690 -384 385 393 -1,240
Other Adjustments Net 542 1,870 234 901 708
Net Cash from (used by) Operating Activities 3,080 675 1,240 930 -1,390
Increase (Decrease) in Prop Plant And
Equipment -5,280 -2,990 -1,960 -1,450 -396
Acquisition Disposition of Subsidiaires - 206 - - -
Increase (Decrease) in Investments 2,060 -1,030 -72 -1,330 1,440
Other Cash Inflow (Outflow) from Investment
Activities 307 - - 53 11
Net Cash from (used by) Invesment Activities -2,910 -3,810 -2,030 -2,720 1,060
Issuance (Purchase) of Equity Shares -1,050 - 1 413 295
Issuance (Repayment) of Debt Securities 170 2,210 -612 574 -267
Payment of Dividends & Other Cash
Distributions -144 - - - -
Other Cash from (used by) Financing Activities 711 1,590 1,420 768 354
Net Cash from (used by) Financing
Activities -315 3,80 804 1,760 382
Net Change in Cash & Cash Equivalents -146 660 15 -38 43
Cash & Equivalents at Beginning of Year 1,140 480 153 191 148
Cash & Equivalents at Year End 994 1,140 168 153 191

Cash FlowSouthwest Airline
$ in million
Fiscal year is Jan - Dec. 2014 2013 2010 2009 2008
Southwest Airlines Net Income Cash Flow $1,140 $754 $459 $99 $178
Depreciation Depletion Amortization Cash-Flow $938 $867 $614 $604 $587
Net Increase (Decrease) in Assets Liabilities $325 $737 $577 $63 -$2,130
Other Adjustments Net $503 $119 -$89 $219 -$152
Southwest Airlines Net Cash from (used by)
Operating Activities
$2,900 $2,480 $1,506 $985 -$152
Increase (Decrease) in Prop Plant And Equipment -$1,750 -$1,450 -$493 -$585 -$923
Increase (Decrease) in Investments $105 $63 -$772 -$986 -$55
Other Cash Inflow (Outflow) from Investment
Activities
-$84 - - $2 -
Southwest Airlines Net Cash from (used by)
Invesment Activities
-$1,730 -$1,380 -$1,270 -$1,570 -$978
Issuance (Purchase) of Equity Shares -$845 -$444 $55 $20 $63
Issuance (Repayment) of Debt Securities -$272 -$318 -$155 $369 $945
Increase (Decrease) in Bank & Other Borrowings - - -$44 -$414 $491
Payment of Dividends & Other Cash Distributions -$139 -$71 -$13 -$13 -$13
Other Cash from (used by) Financing Activities $8 -$18 $8 $368 $168
Southwest Airlines Net Cash from (used
by) Financing Activities
-$1,250 -$851 -$149 $330 1,65
Southwest Airlines Net Change in Cash & Cash
Equivalents
-$73 $242 $147 -$254 -$845
Cash & Equivalents at Beginning of Year $1,360 $1,110 $1,110 $1,370 $2,210
Cash & Equivalents at Year End $1,280 $1,360 $1,260 $1,110 $1,370

Financial Statement
Third Significant change
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2014
2013
2010
2009
2008
American Airlines Net Cash from (used by)
Operating Activities
Southwest Airlines Net Cash from (used
by) Operating Activities
-800.00%
-600.00%
-400.00%
-200.00%
0.00%
200.00%
400.00%
2014
2013
2010
2009
American Airlines Net Cash from
(used by) Operating Activities
Southwest Airlines Net Cash from
(used by) Operating Activities

Question 2:
WHAT IS THE MOST SIGNIFICANT CHANGE IN
THE INDUSTRY USING THE FINANCIAL RATIOS?

Airlines Industry Ratios
Industry 2014 2013 2010 2009 2008
Liquidity ratio
current ratio 0.71 0.71 0.83 0.84 0.87
quick ratio 0.58 0.41 0.57 0.53 0.51
cash ratio
Profitability
profit margin 0.80% 12.66% 2.99%
return on asset 0.09 0.04 0.57
return on equity 0.54 0.45
Financial leverage ratios
Debt ratio 1.41 3.94 33.1 3.53 0.97
Time interest earned 7.5 4.7 2.8 1.03
Cash coverage ratio 0.4 0.2 0.16
Asset management ratios
Inventory Turnover 22.2 25.5 29.4 52.18 33.5
Day sale in inventory 16.5 14.3 12.4 6.91 10.8
Receivables Turnover 23.1 22.4 27.7 26.8 17.2
Total Asset Turnover 2.62 4.04 1.59 3.61 3.54
Day sale in receivables 15.8 16.2 1.59 13.6 21.2
DuPont analysis

Question 3:
DOES YOUR COMPANY HAVE THE SAME CHANGE? IF
NOT WHY DO YOU THINK THIS IS
DIFFERENT? IF THE SAME THEN WHAT IS YOUR
ANALYSIS OF WHY THIS CHANGED SO MUCH?

Debt ratio
The debt ratio in 2010 was the most change to 2014
Debt ratio
2008 2009 2010 2013 2014
American Airlines 1.12 1.14 1.16 1.06 0.95
Industry 0.97 3.53 33.1 3.94 1.41
0
5
10
15
20
25
30
35
2008 2009 2010 2013 2014
American airlines
industry

Question 4:
ANALYZE ALL THE FINANCIAL RATIOS FOR YOUR COMPANY,
COMPETITOR AND INDUSTRY,
GRAPH EACH ONE AND SHOW THE TREND
FROM 2008-2014.

Analyze ratios
Liquidity ratio analysis
•Current ratio
•Quick ratio
Financial leverage ratio analysis
•Time interest earned
Asset management ratio analysis
•Inventory turnover
•Total asset turnover
Profitability ratio analysis
•Return on asset
•Day’s sale in turnover
•Return on equity

Compared the ratios of 2 companies
and industry
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2008 2009 2010 2013 2014
American Airlines
Southwest Airlines
Industry
Current ratio
2008 2009 2010 2013 2014
Southwest Airlines 1.03 1.25 1.29 0.79 0.74
Industry 0.87 0.84 0.83 0.71 0.71

Debt ratio
The debt ratio in 2010 was the most change to 2014
Debt ratio
2008 2009 2010 2013 2014
Industry 0.97 3.53 33.1 3.94 1.41
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2008 2009 2010 2013 2014
American Airlines
Southwest Airlines
Industry

Quick ratio
Quick ratio
2008 2009 2010 2013 2014
Industry 0.38 0.41 0.57 0.53 0.51
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2008 2009 2010 2013 2014
American Airlines
Southwest Airlines
Industry

Cash Coverage ratio and time interest
earned
Cash coverage ratio
2008 2009 2010 2013 2014
American Airlines -1.19 -2.34 0.74 -1.55 5.08
Industry 0.2 0.16 0.4
Times interest earned
2008 2009 2010 2013 2014
American Airlines -2.86 -2.49 -0.64 -2.55 3.62
Industry 2.8 4.7 7.50

Inventory turnover ratio
Inventory Turnover Ratio
2008 2009 2010 2013 2014
Industry 33.50 52.18 29.40 25.50 22.20
0.00
10.00
20.00
30.00
40.00
50.00
60.00
2008 2009 2010 2013 2014
American Airlines
Southwest Airlines
Industry

Day’s sales in inventory
The ratio of American airlines was high significantly
with Southwest Airlines and industry
Days' sales in inventory
2008 2009 2010 2013 2014
Industry 1.50 0.96 1.59 1.86 1.92
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
2008 2009 2010 2013 2014
American Airlines
Southwest Airlines
Industry

Total asset turnover
The ratio of industry airline is higher
than both companies
Total asset turnover
2008 2009 2010 2013 2014
Industry 2.62 4.04 3.66 3.61 3.54
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2008 2009 2010 2013 2014
American Airlines
Southwest Airlines
Industry

Question 5:
SHOW A GRAPH OF THE 3 MOST SIGNIFICANT
FINANCIAL RATIO CHANGES FROM 2008-2014,
DID YOUR COMPETITOR HAVE THE SAME CHANGE AND
INDUSTRY? WHY OR WHY NOT?

Analyze financial ratios of American Airlines
RATIOS 2014 2013 2010 2009 2008
Debt Ratio 0.95 1.06 1.16 1.14 1.12
Current Ratio 0.90 1.04 0.78 0.86 0.63
Quick Ratio 0.83 0.96 0.71 0.79 0.58
Cash Ratio 0.13 0.16 0.07 0.08 0.07
Inventory Turnover 30.64 19.61 30.37 30.23 38.50
Days Sales In
Inventory
11.91 18.61 12.02 12.07 9.48
Receivables
Turnover
24.10 17.14 30.04 25.94 29.31
Days Sales In
Receivable
15.15 21.29 12.15 14.07 12.45
Total Asset Turnover 0.97 0.63 0.88 0.78 0.94
Return on Assets 0.07 -0.04 -0.02 -0.06 -0.08
Profit Margin 0.07 -0.07 -0.02 -0.07 -0.09
Return on Equity 1.43 0.67 0.12 0.42 0.70
-0.10
-0.05
0.00
0.05
0.10
2014 2013 2010 2009 2008
Profit Margin
0.00
0.50
1.00
1.50
2014 2013 2010 2009 2008
Return on Equity
-0.10
-0.05
0.00
0.05
0.10
2014 2013 2010 2009 2008
Return on Assets

Question 6:
SHOW ONE CHART OF ALL THE FINANCIAL RATIOS, 2008
AND 2014 FOR YOU AND YOUR
COMPETITOR. INDICATE WITH COLORS THE ONES THAT
ARE DIFFERENT, ESPECIALLY IF ANY
TREND IN A DIFFERENT DIRECTION. USE ONLY THOSE 2
YEARS FOR YOUR CHART.

Financial Ratios
AMERICAN AIRLINES
RATIOS 2014 2008
Debt Ratio 0.95 1.12
Current Ratio 0.90 0.63
Quick Ratio 0.83 0.58
Cash Ratio 0.13 0.07
Inventory Turnover 30.64 38.50
Days Sales In Inventory 11.91 9.48
Receivables Turnover 24.10 29.31
Days Sales In Receivable 15.15 12.45
Total Asset Turnover 0.97 0.94
Return on Assets 0.07 -0.08
Profit Margin 0.07 -0.09
Return on Equity 1.43 0.70
SOUTHWEST AIRLINES
RATIOS 2014 2008
Debt Ratio 0.66 0.65
Current Ratio 0.74 1.03
Quick Ratio 0.69 0.96
Cash Ratio 0.22 0.49
Inventory Turnover 38.33 42.32
Days Sales In Inventory 9.52 8.63
Receivables Turnover 50.99 52.73
Days Sales In Receivable 7.16 6.92
Total Asset Turnover 0.92 0.77
Return on Assets 0.06 0.01
Profit Margin 0.06 0.02
Return on Equity 0.17 0.04

Bonds and bonds valuation
Bonds & Bonds Valuation
ISSUE DETAIL American Air Southwest Air
Amount Outstanding 60,900,000 86,300,000
Par Value 1000 0
Issue Size 100,000,000 86,300,000
Coupon 0 9.15%
Coupon Type Fixed Fixed
Coupon Frequency Semi-Annually Semi-Annually
Day Count Basis 30 / 360 30/360
First Payment Date 3/15/1987 1/7/1995
Accrual Start Date 9/15/1986 10/17/1995

Working capital management
2008 2009 2010 2013 2014
CCC -0.73 -12 -15.26-1.66 4.51
-20
-15
-10
-5
0
5
10
2008 2009 2010 2013 2014
CCC
CCC

CONCLUSION
•The financial ratios of airlines industry has a
significant change with both company.
• The number of business and leisure trips is
expected to increase. This is supported by
economic growth.

REFERENCES
https://en.wikipedia.org/wiki/American_Airlines
https://en.wikipedia.org/wiki/Southwest_Airlines
http://amigobulls.com/stocks/AAL/income-statement/annual
http://amigobulls.com/stocks/AAL/balance-sheet/annual
http://amigobulls.com/stocks/AAL/cash-flow/annual
http://amigobulls.com/stocks/LUV/income-statement/annual
http://amigobulls.com/stocks/LUV/balance-sheet/annual
http://amigobulls.com/stocks/LUV/cash-flow/annual
http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=aal
http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=luv

Power point of Class 2 group 5 American Airlines

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Power point of Class 2 group 5 American Airlines